


Happy GFC 10th Anniversary

by ScorpLee



Category: Margin Call (2011)
Genre: Gen
Language: English
Status: Completed
Published: 2017-07-18
Updated: 2017-07-18
Packaged: 2018-12-03 23:11:03
Rating: General Audiences
Warnings: No Archive Warnings Apply
Chapters: 1
Words: 1,266
Publisher: archiveofourown.org
Story URL: https://archiveofourown.org/works/11542386
Author URL: https://archiveofourown.org/users/ScorpLee/pseuds/ScorpLee





	Happy GFC 10th Anniversary

Ten years past, since that night I stood on the rooftop at 200 West Street, the turning point of my life, or maybe everyone’s life, or even the human history.

I remember I was quitting smoking but I was so messed up that only cigarettes can calm me down. I looked down at Manhattan. It was 3am, but the city looked so awake. I wondered if she ever gets sleep. There were lights, shining from the streets, offices, decorations, boasting its glory, shouting at the world that New York is the centre of the universe. But all I saw was darkness, twisted, appalling, yet tempting.

I jumped onto the handrail. My heart was beating fast. I was scared. Not scared that I might fall, but scared that I might jump. The world looked so innocent. Those innocent while ignorant people had no ideas what was coming and what had happened. That left me, one of few people who did, and I had no say.

I was sitting on the edge, with one side ethics, the other side interest, one fantasy and the other reality. The world was beneath me. It must be what people on the top felt like. I knew exactly what they were going to do. I felt I was totally screwed. Both sides were pulling me. Shall I stay or shall I go? The darkness looked even more tempting. It was drawing me in.

I stayed. Today is 12th July 2017. I call it 10th anniversary. I opened my diary, looking back at those days.

 

12 July 2007

We managed to dump toxicant today. Not all of them, but is sufficient for us to survive. We took tremendous losses from the selling. We also shorted a large amount of subprime mortgage-backed securities, which is expected to offset the losses.

Another round of layoffs started. I’m still at the firm, but I suspect this won’t be long.

 

20 July 2007

Some other banks started taking same actions in the last few days. But it was getting harder and harder for them because the market has started becoming aware of the problem.

 

9 August 2007

BNP Paribas terminated withdrawals from three hedge funds. Newspaper cited “a complete evaporation of liquidity”. It is no longer a secret. Too many sub-prime mortgages went on default. House price is plummeting. A friend of mine visited Detroit, and found out that most of houses were empty. If this keeps going, soon houses would worth less than the mortgage loan. I doubt if foreclosure is going to save them.

 

24 March 2008

We made large profits during last financial year, even after the crisis blasted, by short-selling subprime mortgage-backed securities.

(Oh. Now looking back at it from ten years afterwards, the action we took ten years ago indeed saved the firm. We are still living, aren’t we? But I’m not proud of what I did. I did misled buyers. I didn’t tell them we were dumping toxic assets. On that day, during that fire sale, my customers had no idea what I was selling to them. But criticising us for profiting from the collapse? Come on. It was within the law. While I am looking back, SEC had no regulations to monitor mortgage-backed security activity.)

 

15 September 2008

Lehman Brothers filed for bankruptcy today. This intensified the current crisis. Our firm’s viability is called into question again.

(That was indeed a big stroke. A signal. The reason why it was them, not us, is not that we found out the problem first and acted first. It is indeed a vital factor, though. The reason is that they misled the market for a really long time. Its operations were reckless. Back in 2003, its balance sheet showed a leverage ration of 26 to 1. This was shown on the book. Who knows what was the figure off the book. Now we all know they cooked the book, in a way that was beyond law. They used deliberate accounting sleightofhand, concealment, and communication of misleading information to maintain a good look on balance sheet. They used “Repo 105” at the end of each quarter to increase its cash so that net leverage would look good. That’s why on 10 September 2008, just three months after reporting secondquarter successes, they announced that its supposedly robust liquidity amounted to approximately $40 billion, but only $2 billion constituted assets that could be readily monetised.)

 

16 September 2008

US federal announced a bailout today, beginning with $85 billion to AIG. Only a handful people left on this floor, after a big layout.

 

21 September 2008

Morgan Stanley and us confirmed to become traditional banking holding companies. They kept investment banking division, though.

 

23 September 2008

Berkshire Hathaway agreed to purchase $5 billion in our preferred stock. It seems the firm is in need of capital.

 

16 October 2008

We received a $10 billion preferred stock investment from the US Treasury, as part of the Troubled Asset Relief Program.

 

I closed the diary. This is basically it. But honestly, I don’t think we spread the risks to the entire market. I thought so at that time. But looking at the big picture now, the market was already standing on the edge, subprime mortgage holders were a blow of wind, and no single firm was strong enough to keep the market still. If we don’t do it, we would be the one who fall, and that’s gonna affect people too, as it what really happened.

There were many causes. High risk, complex financial products. No one even knows what derivatives mean. Undisclosed conflicts of interest. Of course, and even undisclosed related party transactions. Failure of regulators, the credit rating agencies. Most importantly, the market itself. Or I can say human, who reign the market. The human nature. People want to live in big houses, drive fancy cars that they can’t afford. This is vanity. On the other side is greed. Some people’s vanity feed others’ greed.

When the market is good and strong, everyone makes money, even the dumpiest one, and people don’t care whether you act beyond laws, or use tricks to make more. While there is a problem, we become the target that people throw rocks at. Subprime mortgages. Indeed we sell them. You are the buyers, willingly and even eagerly. Buying and selling. That’s the market. No party can do it without the other. So tell me now, who’s to blame.

Greed has always been the fundamental driver. It applies equally to everyone. Human being never cease to get satisfied. There is something inside us, always being hungry, craving for more. We kindly call it as risk-taking attitude. And this brought down many firms – Enron, WorldCom, HIH, AWA, Maxwell. Screw corporate governance. Corporate governance has never been the problem, nor will never be the solution. It’s just an excuse human find for itself. After 20 years building up corporate governance, after Act and Act and Act to respond to collapses, look what we have now. Auditing is just an assurance, never is a guarantee. Sarbanes-Oxley Act only puts difficulties onto firms, and scares foreign investments away. Eurozone countries lost their monetary sovereign, and their fiscal policies.

The bigger it is, the harder for it to recover. Same to family. That’s why I’m still single, for I learnt my lesson ten years ago, and this is my response.

 

12 July 2017

Ten years is a phase, is a loop. Economic crisis in every ten years is a loop that has not yet been broken. Today is 12 July 2017. GFC, happy 10th anniversary.


End file.
